The government has merged the Authority for Advance Rulings (AAR) for direct and indirect taxes, the two arms of Finance Ministry, where overseas firms and Non-Resident Indians can know their tax liabilities.

"To further enhance efficiency in tax administration, I intend to merge the two Authorities for Advance Rulings on Direct and Indirect Taxes by amending the relevant Acts," Finance Minister Pranab Mukherjee said unveiling the budget for 2008-09.

The move, he said, would enable the Authority for Advance Rulings set up under the Income Tax Act 1961 to also function as the Authority for Advance Rulings for Indirect Taxes. The AAR was established to address the taxability issues of NRI assessees. The assessees can put in an application to the authority and seek judgement on their tax issues.

The rulings given by the tax authority is binding on the two parties the revenue department and the individual assessee, or the company.

However, a ruling sets a precedence for other companies involved in similar activities.

There were talks for a long time to merge the two for functional efficiency as the direct taxes AAR had more cases to handle but the indirect taxes AAR did not have enough.